MBKET Warns of Property Market Slowdown, Recomm. “Hold” on Possible Softening 2H Earnings

Maybank Kim Eng Securities (Thailand) (MBKET) forecast five developer stocks under its coverage, including AP, LH, PSH, QH, and SPALI, to report a healthy 1H21 performance in terms of both presales and earnings, with a focus on SPALI’s outstanding 2Q21/1H21F profit growth, but raised AP as the Top Pick property stock.

The analyst from MBKET expects 2Q21 Thailand’s property sector earnings to grow by 34% YoY and 6% QoQ to 5.2 billion baht, driving 1H21 earnings to 10 billion baht, +26% YoY. Note that presales for 2Q21 and 1H21 grew 10.5% YoY and 17% YoY, respectively. 

The best performer in 2Q21 and 1H21 is likely to be SPALI with estimated 2Q21 earnings of 1.5 billion baht (+257% YoY and +102% QoQ) and 1H21 of 2.2 billion baht (+92% YoY) thanks to revenue recognition from two newly completed condominiums. 

While other 4 developers (LH, QH, PSH and AP) are estimated to report combined earnings of 3.74 billion baht for 2Q21 (+7% YoY, -11% QoQ) and 7.9 billion baht for 1H21 (+15% YoY). 

For the 2H21 outlook, MBKET sees a challenging awaiting for developers particularly given last year’s high base. MBKET will review our full year forecast post 1H21 results but it expects to see soft demand from the economic slowdown, weak consumer confidence and a potential delay in new launches. 

However, MBKET has warned of downside risks that mainly derive from a weak economic outlook and consumer confidence. 2H21 earnings may soften compared to the high 2H20 base given the slowdown in the property market amid sluggish GDP growth and poor sentiment. Meanwhile, upside risks are the ability to contain Covid-19 outbreak and the reopening of the economy by 4Q21.

MBKET maintains a “NEUTRAL” rating on Thai property sector and set a target price for its coverage stocks as follow; AP (TP: ฿9.80), LH (TP: ฿9.20), PSH (TP: ฿10.00), QH (TP: ฿2.44), and SPALI (TP: ฿24.50).